Internal Audit Checklist: Ordering Process

Ordering Process

In general, the objective of an internal audit is to assess the risk of material misstatement in financial reporting. Material misstatements can arise from inadequacies in internal controls and from inaccurate management assertions. As such, testing the validity of various implicit managerial assertions is a key objective of an internal auditor.

While this applies to all financial cycles, this article is the first in a series focusing on the General Control Activities for the Purchasing cycle. The most important general control areas for Purchasing include:

In this post, we’ll focus on the General Control Activities for Ordering.

Order Goods

The goal of the ordering process is to make sure that all purchased goods have been properly authorized. The following should be included in any audit:

  • Verify purchase order authorizations are restricted through the use of purchase requisitions.
  • Validate that evidence is maintained to show that purchase orders are authorized in line with the Authority Schedule.
  • Make sure the list of open purchase orders is reviewed and cleared down on a regular basis.
  • Check to determine if the system can be set up so that purchase orders may only be placed with approved suppliers.
  • Validate that there is a periodic review that purchase orders have only been placed with approved suppliers.

E-Procurement

When the business has an E-Procurement system in place it is important to ensure that only authorized personnel can create/change the pricing, and can place orders through the system. The following should be included in any audit:

  • Verify that authorization is required for ordering and /or alteration of pricing in e-procurement.
  • Make sure there is strict budget control for e-procurement

In conclusion, auditing standards require that auditors test basic underlying management assertions implicit in the financial statements. Key objectives to these assertions are; Existence and Completeness, Rights and Obligations, Valuation or Allocation, and Presentation and Disclosure.